Bitcoin miners: US and Russia go shopping after China ban

By Raffaele Redi

China’s ban leads Russian and US miners to go on a shopping spree

China’s ban on cryptocurrencies marked the beginning of a new cold war between Russia and the US, with the former trying to avoid a concentration of mining resources in North America, while the US attempts to maintain its de facto dominant position through billionaire debt issuance plans or share offerings.

However, while mining outfits in Russia are mostly focused on snapping up second-hand miners that are no longer required in mainland China, large US large miners, about to complete their migration from China, are enlarging their fleets by securing latest-generation hardware.

US miners’ shopping season

As manufacturers of mining hardware begin to accept pre-orders for the third and fourth quarters of 2022, large miners are gearing up for a shopping bonanza, while smaller ones have already secured thousands of the latest rigs.

US miners will fund their investments in new hardware in different ways. While the Nasdaq-listed Bit Digital (BTBT) recently raised around $80m by closing an equity placement, Riot Blockchain (RIOT) sold up to $600m of its common stock through an ATM offering.

Meanwhile Marathon Digital Holdings, one of the largest bitcoin mining enterprises in North America, recently announced the offering of $650m’s worth of five-year senior notes with a 1.0% coupon. This marked an expansion of its earlier offering of $500m’s worth of notes.

US miners migrate

With the global shipping crisis slowing down the migration process from China to the US, miners are using now aeroplanes to transport their computers, while scrapping most of their fleet on the Chinese mainland to avoid high maintenance costs, or selling it on the second-hand market – mostly to Kazakhstan and Russia.

Some of the hardware is in fact obsolete, and much of it may not legally be used in the US or the EU, as their regulations differ from those in China. One example is Bit Digital, which abandoned 1,407 obsolete miners in mainland China, saying it would be “uneconomical or impossible to repair or migrate them”.

Moreover, the company sold 4,200 miners, recording a gain of $0.375m, which it will invest in new hardware.

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“The miners sold were deemed to have a lower expected return on invested capital than miners we believe we can purchase, and/or were deemed unsuitable for long-distance migration to North America,” Bit Digital said, announcing the completion of the company’s migration operation, with 100% of its fleet now arrived in North America.

Marathon Digital, on the other hand, recently began chartering planes to mitigate global logistics issues and expedite the tranfer of its mining hardware from China to the US.

Russia on the second-hand market

The second-hand miners market has found favourable ground in Russia, where most miners are small companies, operating in private homes or garages and waiting for a clear position (and regulation) on cryptos from the Kremlin.

Again, most of the Chinese hardware may not be usable in the US or Europe as they operate with different regulations regarding raw materials. The costs of shipping hardware from China to the US can also be prohibitive in some cases.

Recently, the Russian Blockchain Association (RACIB) announced that its largest foreign partner – a consortium of the largest mining companies in China, which prior to the ban contributed more than 25% of the global hash rate of the main cryptocurrencies – is providing Russia with its redundant mining hardware following the ban.

Neither RACIB nor Marathon Digital Holdings responded immediately to a request for comment.

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